LBBW's green sterling return gets cold reception

4 min read
EMEA
Tom Revell

Landesbank Baden-Wuerttemberg struggled to summon much investor interest for a £250m green senior non-preferred (SNP) on Monday, with its approach to pricing questioned, while elsewhere the FIG pipeline continued to build.

LBBW had the market to itself in an otherwise quiet start to the week in the European FIG space. The German bank emerged just after 9:30am UK time with a December 2025 transaction offered at Gilts plus 120bp/125bp area.

But after some four and a half hours, leads Credit Suisse, LBBW, Lloyds and RBC set the size at £250m and the spread at 125bp.

The size of the book was not disclosed and it is understood the deal was not fully subscribed.

Bankers said the result would add to a sense of uncertainty over the strength of the sterling primary market, which has seen other lacklustre trades in recent weeks.

"It is not the confidence enhancing trade we wanted to see," said a syndicate banker.

Some bankers away from the leads said the deal struggled because it was marketed too tight relative to recent sterling trades.

The price looked fair versus LBBW's five-year sterling green SNP sold in January, they said. That 1.5% February 2025 deal was bid around 102bp on Monday, according to Tradeweb.

"But if you look at the rest of the universe of what you could own, it's the wrong price," said a second syndicate banker away from the deal.

Bankers noted that only last Friday, Skipton Building Society sold a £350m five-year SNP at 215bp, while the previous week Coventry Building Society sold a less subordinated £250m five-year senior preferred offering at 120bp.

A banker at one of the leads acknowledged they had taken a more aggressive pricing strategy than some recent deals. He said their approach had taken into account differentiation in credit quality between LBBW and other issuers cited as comparables.

"There was a good number of orders in the deal today, so evidently a number of investors recognised the diversification play of this credit, not just wanting to buy the same names in sterling," he added.

He said LBBW ultimately paid a premium of 5bp-10bp versus its previous deal, but also secured a level that was competitive versus the euro market.

"Ultimately LBBW ended up securing the £250m they wanted at a level pretty comparable to what they may have secured in the euro market," he said. "They have a natural sterling fund requirement, which to a degree provides a natural FX hedge."


PIPELINE TOPS UP

Elsewhere, the FIG pipeline continued to build on Monday, as four banks announced mandates for investor calls ahead of planned new issues.

Mizuho Financial Group is marketing a TLAC-eligible senior unsecured five-year euro benchmark green bond and/or 10-year bond, while Sumitomo Mitsui Trust Bank is preparing an inaugural seven-year euro benchmark covered bond.

France's Banque Federative du Credit Mutuel is lining up a five to seven-year green euro senior preferred, while Canada's Federation des caisses Desjardins du Quebec will hold calls ahead of a three-year US dollar covered bond.

The euro pipeline already included Hamburg Commercial Bank (HCOB), which has been marketing a five-year Tier 2 transaction. A banker close to the deal said it remains in a holding pattern, adding the issuer is under no pressure to come to the market.

Iccrea Banca is also awaited. The Italian lender held investor calls last week ahead of a five-year non-call four senior preferred debut and said on Wednesday it expected to launch the deal early this week.